Feb1,2008 NFP and chart

As we all expected,NFP is due to announce every first friday of the month.
We want to know,what is the impact of NFP announcement to chart.In this case we use our lovely chart,pair GBP:JPY on 15 minute chart.

As we can see,before the news market relatively calm.
Then when the news came,it drop down because of negative impact of the news,then there is revision and market responding as we can see in the chart.
After the revision we can see also the anticipated reaction of market.

Take a look at the chart:




What we can learn(taken from pfxglobal):

1. News releases may lead to both short-term and long-term volatility and breakouts

2. Trading the event itself is tough—investing in the trend is easy

3. All news is not created equal

4. Understand the context of a news release to make the most of the opportunity

The news in the forex is mostly economic. Aside from central bankers, there are very few “personalities” that can move the market very much. Unlike the stock market, where each company represents a micro-economy, currency prices reflect the entire economy. Because forex news comes mostly from government and association sources, it can seem a little boring and all the acronyms are tough to keep straight. We can help with those issues and help you turn the news into a productive tool you can use in your trading.

First, let’s clarify the difference between “trading the news” as a very short-term strategy and using the news to assist in forecasting prices and identifying opportunities on a longer-term basis. A lot of traders talk about being able to “trade the news” but most often define that as a short-term position entered to take advantage of the volatility that sometimes appears following a news announcement. While placing these short-term trades can be tempting, there are two significant problems most traders face when attempting to “scalp,” or short-term trade, the news.

1. Most dealers will either widen the spread during periods of news-induced volatility, which increases trading costs and may make entering an order and placing protective stops almost impossible. Some dealers will also “lock out” and delay order fills. When the market is moving very fast, these actions can be very frustrating.

2. When an announcement moves the market, it may move it a lot. That sounds great on the surface, but it rarely moves all one direction. The subsequent whipsaws and order entry difficulties can make trading during the release itself very frustrating.

What a news event means:

Economic news comes from several sources, and the actual releases can be a little like reading the warranty information that came with your last electronics purchase. Looking up a definition is a good idea, but what really gives a release meaning is its context—the expectations and trend surrounding the announcement. If a release misses or exceeds expectations, volatility will increase, and not just in the short term. Similarly, the trend of the release compared to previous announcements will impact the market. If an economic fundamental is improving with each release, the trend is positive and may have a lifting affect on that currency. The opposite is also true.

So how do you find expectations and the trend of an announcement? That information is widely available but it is not always compiled in the same place. You can compile it yourself, or we have a resource for you to use on the PFX website.

The Calendar—The PFX calendar is a little different than other calendars available on the internet. First, we trim the releases to cover just those announcements that are likely to have the biggest impact on prices. I am sure we are all very interested in Japanese Machine Tool Orders, which is released each month, but it has limited usefulness when trying to forecast prices. Second, we compile the consensus opinions available from economists and analysts. Finally, we provide a visual reference to the historical reports that preceded this announcement.

The Forecast Seesaw—We provide this tool for every announcement to help you visualize what affect the release is likely to have on prices. If actual results fall beyond the number on the left hand side of the seesaw, we expect the value of that currency to rise. If results fall beyond the number on the right, we expect the currency’s value to also fall.

Historical Movements—The trend of the announcement is best when seen visually. The chart provided displays an arrow on the date of the previous releases and the expected affect it should have had on the price of the currency. In most cases, the pairs used are crossed with the USD as a common denominator, but we use the US Dollar index for US announcements.

Tips for using this resource in your trading:

1. Avoid scalping news announcements. Traders trying to play the short-term impact of an announcement have a very high burn-out rate.

2. Pay attention to the trend of previous releases. If the announcement conforms to the price trend itself, a nice continuation is likely.

3. Expectations are everything. If the release misses expectations significantly and a reversal of the price trend is likely, stay out.
4. Don’t drown yourself in the news. It’s easy to get caught up trying to understand the likely impact of every possible piece of news, but very few releases will have much of an impact on actual prices.